The Taxation of Mortgages; The Southern Negro; Congress and Anti- Trust Legislation; The Proposed Political Science Association. The Complaint and Injunction in the case of the Connecticut Railway and Lighting Company vs. The Amalgamated Association of Street Scott's Money and Banking; Ostrogorski's Democracy and the Organi- zation of Political Parties; deBloch's Future of War in its Technical, Economic and Political Relations; Hutchins and Harrison's History of Factory Legislation; Judson's Treatise on the Power of Taxation, State and Federal, in the United States; Dale's Principles of English Consti- THE YALE REVIEW A QUARTERLY JOURNAL FOR THE SCIENTIFIC DISCUSSION OF ECONOMIC, POLITICAL, AND SOCIAL QUESTIONS. THE YALE REVIEW is owned by The Yale Publishing Company. It is edited by Professors HENRY W. FARNAM, E. G. BOURNE, JOHN C. SCHWAB, IRVING FISHER, HENRY C. EMERY, CLIVE DAY and ALBERT G. KELLER. Committed to no party and to no school, but only to the advancement of sound learning, it aims to present the results of the most scientific and scholarly investigations in political science, but contributors alone are responsible for the opinions expressed in the articles. It is published by THE TUTTLE, MOREHOUSE & TAYLOR Co., 125 Temple Street, New Haven, Conn., to whom all business communications should be addressed and all subscriptions paid. All communications relating to articles, book reviews, exchanges, and editorial work in general should be addressed to THE EDITORS, YALE REVIEW, YALE STATION, New Haven, Conn. Copyright, 1903, by The Yale Publishing Company, New Haven, Conn. The Taxation of Mortgages; The Southern Negro; Congress and Anti-Trust Legislation; The Proposed THE Political Science Association. 'HE taxation of mortgages is the last means proposed for remedying the defects of the present system of State and local taxation. The subject has been receiving unusual attention both in legislative debates and in economic literature. A variety of motives makes it desirable to materially change the present method of taxing credits. The inequality of our crude general property tax has long been known. Alexander Hamilton spoke of the "iniquitous and inefficient" system, and held that "all attempts to amend it without totally changing it are fruitless." The inequalities of treatment involved in the attempts to tax all mortgages secured by land are particularly glaring. With the growth of such corporations and associations as insurance companies and savings banks, which invest a large part of their resources in mortgages, but which escape being taxed upon these mortgages because of the taxes, often light, which they pay in other ways, the only mortgages which can be effectively taxed are those held by individuals, especially by trustees and executors. These last constitute only perhaps one-twentieth of all mortgages outstanding, compared with one-half held by savings banks, trust and insurance companies. The widows and orphans have sometimes received more consideration by economists and legislators than they deserved; but in this case they unquestionably deserve active sympathy. Unquestionably it is they who suffer most under the present régime of haphazard and unequal taxation. The rise in government bonds and similar securities, and the common legal restrictions put upon trustees and executors in the choice of investments almost force them to invest trust funds in local bonds and mortgages. Their existence and amount cannot be easily disguised; the mortgagee is usually a resident of the same State or city; in a word, these mortgages to individuals are more readily taxable than others. Of late they have greatly increased in the tax lists through the activity of the tax assessors. Moreover, the corporate lenders, such as insurance companies, establish the market rate of interest to be charged. The individual lenders have to accept the same rate, and cannot avoid assuming the tax, and thereby reducing the net interest they receive. As a general rule the incidence of the tax is not upon the lender. He recovers the amount from the borrower in a higher interest charge, but where, as in New York, the great mass of lenders on the security of land are exempt from mortgage taxation, the small minority of individual lenders cannot raise the rate of interest charged. If the tax laws were uniformly enforced, an exodus of individual lenders from the market would necessarily result. However, in practice the law's inequality and uncertainty heap the burden upon the conscientious and unlucky. It is a question between different classes of lenders. The agitation in New York during recent years in regard to mortgage taxation has clearly shown how little legislation or popular sympathy are concerned with the individual lenders. The movement has been strongly toward relieving the mortgagor and burdening the mortgagee. In the discussion it has become clear that the generally accepted notions about the typical mortgagor and mortgagee need revision. The typical mortgagor is no longer in the popular mind the active and enterprising young man with few resources but with boundless energy and skill to develop his farm or lot; the typical mortgagee is no longer the passive Croesus who lives in ease on the proceeds of lending his accumulated wealth to less fortunate citizens. The typical borrower is more nearly the real estate speculator, and the lender the small man acting through the agency of a savings bank or an insurance company. In the long run the borrower will inevitably bear the burden put upon the lender. The suggested exemption of mortgages held by savings banks and insurance companies, as proposed in the recent bills in the New York legislature, is really in the interest of the borrower. In fact, the encouraging thing about the recent discussion has been the light thrown upon the real position of the borrower in the matter. Experience in many States, notably in California, Maryland, Massachusetts and Michigan, is instructive and convincing. The borrower is always the loser in the attempt to tax mortgages; he invariably assumes the burden in an increased rate of interest sufficient to cover the tax as well a premium for the risk assumed by the lender. It seems a simple thing to fit the taxation of mortgages to the general property tax. But it involves double taxation, not in the sense that both lenders and borrowers are taxed on the basis of the same piece of land, but in the sense that the borrower is doubly taxed, once on the ownership of the land and a second time in an increased interest charge on his mortgage. Mortgaged land is discriminated against as compared with non-mortgaged land, and if it is a question between owners of mortgaged land and owners of unmortgaged land, it is reasonable to suppose that no step will be taken to relatively benefit the latter class. In some States, for instance in California, mortgage taxation has been fitted to the existing property tax by assessing mortgaged land at its net value. The borrower is taxed upon the value of the land minus the mortgage; the lender is taxed upon the mortgage. This appears to be a reasonable way out of the difficulty, but in reality it reverts to the old one. The borrower bears the burden in an increased rate of interest, and no law aimed at shifting the burden upon the lender can bring about a different result. As a question between borrowers and lenders, reason and experience conclusively show that legislation is ineffective in forcing the lenders to permanently bear the tax. The recent discussions have convinced many of this. Many, too, have become convinced that all attempts to tax mortgages injure that class, so that the plan for total exemption of mortgages from taxation |